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Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

cnbc.com

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Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#161

Post by 6gvONxR4sf7o »

elliekelly wrote: post #106
6gvONxR4sf7o wrote: post #65

Earlier quoted context omitted.

Can someone ELI5 how this works to those of us who only buy and sell things? I've looked up the definitions, but I'm curious about the purposes and practical risk/reward scenarios of this particular sort of bet.

When you buy a “put” you are entering into a contract that gives you the right, but not the obligation, to sell X number of shares of Acme Class A common stock for $Y/share on (or sometimes within) a specific date. So let’s say Acme Class A is currently trading at $50/share. If you think, for whatever reason, Acme Class A common stock will be trading at $1 next week you might want to buy a put that lets you sell 100,…

Great explanation, thanks. Do you happen to know far out these contract dates tend to be? Is it standardized, or a thing you negotiate (at normal levels and at giant $0.5B levels like in the article)?

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#162

Post by fullshark »

seem_2211 wrote: post #154
fullshark wrote: post #136

Earlier quoted context omitted.

> I'd be more skeptical but EVs are eventually going to cost way less to make than typical ICE (internal combustion engine) cars, and per unit that savings translates into a lot of fucking profit. What's the basis for this? Battery tech evolution and ICE cars have no more (safe) optimizations to make to get costs down?

This is also predicated on the idea that every part of Tesla's operations are substantially better than existing automakers. Do people really believe that Tesla is literally run 10x better than Toyota, Volkswagen, Daimler, BMW or Honda? I don't think so. Then there's the nightmare of trying to appeal to two wildly different consumer groups. At the low end: does Tesla have a meaningful reliability advantage versus Hon…

I wonder if it's as simple as the market confusing all new technology companies with software companies, which have incredible distributional advantages and the ability to grow revenues from optimizations.

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#163

Post by [deleted] »

turbinerneiter wrote: post #15

Teslas price is just too high. I think they will be very successful and become a big, dominant car maker. But their price only makes sense if they end up being the only car maker left. That's not realistic. Building an electric car is not that hard, especially if Tesla already did all the hard lifting for you. For a while I was thinking that the battery play - becoming the number 1 battery supplier - will justify the…

[deleted]

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#164

Post by MrPowers »

bryanlarsen wrote: post #118
turbinerneiter wrote: post #15

Teslas price is just too high. I think they will be very successful and become a big, dominant car maker. But their price only makes sense if they end up being the only car maker left. That's not realistic. Building an electric car is not that hard, especially if Tesla already did all the hard lifting for you. For a while I was thinking that the battery play - becoming the number 1 battery supplier - will justify the…

The statement "Tesla market value is the same as everybody else put together" means either Tesla is expensive or everybody else is cheap or the statement is inaccurate. It's a little bit of all three. All other car companies are primarily debt financed rather than equity financed. Ford's market cap is $45B, but because it has $120B in debt which means it is worth $120B to it's bondholders and $45B to stockholders for…

I agree with the sentiment that comparing Tesla's market cap with traditional car companies is inaccurate.

For certain companies, market capitalization is a good proxy for enterprise value, but as this poster is mentioning, that's not always the case for companies with debt.

enterprise_value = market_cap + debt - cash

Looking at the market caps of long-standing US car manufacturers is doubly problematic cause they have significant pension obligations. They're producing cars to build shareholder value and pay for retirements.

Comparing market capitalizations of companies that have completely different debt / pension obligations is misleading.

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#165

Post by nawitus »

clomond wrote: post #114
turbinerneiter wrote: post #15

Teslas price is just too high. I think they will be very successful and become a big, dominant car maker. But their price only makes sense if they end up being the only car maker left. That's not realistic. Building an electric car is not that hard, especially if Tesla already did all the hard lifting for you. For a while I was thinking that the battery play - becoming the number 1 battery supplier - will justify the…

While I won't dispute that Tesla's share price is high given where the company is at right now when valued as an auto business, there are a few things I think are worth mentioning and commenting on in your post. > Building an electric car is not that hard, especially if Tesla already did all the hard lifting for you. This couldn't be further from the truth. While making a prototype EV is relatively easy, yes. EV indu…

European car brands (combined) sold more EVs in January-March than Tesla. Also, Nissan was selling more EVs than Tesla for many years. It just doesn't seem that difficult to scale EV production.

Source: https://insideevs.com/news/504647/global-plugin-sales-march-...

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#166

Post by cl0ckt0wer »

treis wrote: post #132
bryanlarsen wrote: post #118

Earlier quoted context omitted.

The statement "Tesla market value is the same as everybody else put together" means either Tesla is expensive or everybody else is cheap or the statement is inaccurate. It's a little bit of all three. All other car companies are primarily debt financed rather than equity financed. Ford's market cap is $45B, but because it has $120B in debt which means it is worth $120B to it's bondholders and $45B to stockholders for…

>Ford's market cap is $45B, but because it has $120B in debt which means it is worth $120B to it's bondholders and $45B to stockholders for a total enterprise value of $160B. I believe that's a bit misleading because it includes Ford's lending arm. They borrow money and lend it out at higher rates. So lots of Ford debt is lent back out to consumers at profit.

I thought money that was owed to you was counted as an asset, not a debt?

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#167

Post by arbuge »

Few things of note:

1. This is a Q1 report. Positions might have been closed out by now.

2. He also bought a large number of FB and GOOG calls, indicating he's positive about those 2 companies. (Same comment as 1. applies though).

3. Strike prices of all these options positions are unknown.

4. Premiums paid are unknown.

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#168

Post by AlanSE »

arcticbull wrote: post #125
bko wrote: post #108

Earlier quoted context omitted.

I'm not sure that's necessarily meaningful. Sure, you pay for optionality in a put as opposed to a short, but it may be easier and cheaper to buy a put than finance a short if you believe the stock will go down. The downside isn't unlimited if you short, since I don't think you'd be on the hook if you hit a margin call, your collateral would simply be seized and your position would be exited. I'm sure there's other i…

With a put option, you pay premium in the form of "theta decay" over time. If Tesla stays flat, you lose your entire premium, and on a stock like TSLA with high implied volatility, that can be a very expensive proposition. Similarly, with a short position, you'll be paying a borrow fee which will vary over time based on short interest.

Fascinating subject. I also just want to mention why it makes sense that people SELL put options, in addition to buying them.

If you sell a put option, then you have the obligation to sell in the future at the fixed price, regardless of the market price at the time. However, many of these positions are "covered", meaning that someone can sell a put option while owning as many stocks as they sell in options. So if the stock goes above the strike price, they have the option of selling the shares the already own. Thus, the seller is not on the hook for infinite losses. They merely trade the potential for unlimited gains in return for a fee.

I've always thought it would be fun to get into options by regular, automated, selling of covered put options. You get paid by speculators for underwriting their speculating. But... options pricing models are like real academic. It's like a real job.

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#169

Post by jeffreyrogers »

cryptoz wrote: post #39
turbinerneiter wrote: post #15

Teslas price is just too high. I think they will be very successful and become a big, dominant car maker. But their price only makes sense if they end up being the only car maker left. That's not realistic. Building an electric car is not that hard, especially if Tesla already did all the hard lifting for you. For a while I was thinking that the battery play - becoming the number 1 battery supplier - will justify the…

Tesla isn't a car company, though. They even removed "Motors" from their name years ago - showing wider interest, and not just batteries. Solar roofing as well, and others. I don't hold TSLA right now, regretfully, I entered pre-split at $27 and sold at $200. I also think the current price is way too high, for what it's worth. WAY too high. But it's not at all about cars, at least not for me, when trying to justify t…

Panasonic makes Tesla's batteries though. I've heard this argument since at least 2015. I was told then that Tesla was just leveraging Panasonic and would eventually make their own batteries. Still hasn't happened.

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#170

Post by Kiro »

incrudible wrote: post #61
turbinerneiter wrote: post #15

Teslas price is just too high. I think they will be very successful and become a big, dominant car maker. But their price only makes sense if they end up being the only car maker left. That's not realistic. Building an electric car is not that hard, especially if Tesla already did all the hard lifting for you. For a while I was thinking that the battery play - becoming the number 1 battery supplier - will justify the…

> I won't short them tough, in the end I'm just a dog on the internet and have no clue how stonks work. To be clear, Michael Burry didn't short Tesla, he bought put options, which gives him the right but not the obligation to sell Tesla stock for a certain price, on a certain date. If the bet works against him, his options expire worthless. This puts an upper limit on his losses. If you have an actual short position,…

Why can't you have a limit on short positions and just withdraw when it reaches it?
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